Cedar Rapids proposes tax increases with 10-year plan to pay for flood control

Property tax rate could increase by more than $2 over 10 years

Hesco barriers filled with sand and covered in plastic sheeting line the Cedar River as the GreatAmeria building and the federal courthouse are seen in southwest Cedar Rapids, Iowa, on Wednesday, Sept. 5, 2018. (Jim Slosiarek/The Gazette)

CEDAR RAPIDS — Cedar Rapids officials are proposing a 10-year bonding plan that could require yearly property tax increases to pay for a $550 million flood control system — $750 million when considering inflation over 20 years — to protect the east and west banks of the Cedar River.

The state and federal governments have committed more than $340 million toward flood control protection, but a minimum $342 million gap remains. How the city would fill the void has long been a question mark, casting doubt as to whether the project would ever be built.

Not anymore, officials say.

“One of the things I’ve heard a lot in the last year is the community really wants this project built,” said Tyler Olson, a Cedar Rapids City Council member and head of the city’s flood control committee. “What we are saying now is the city has a plan to close that gap and the project is going to get built, so it is a big day for the community. I think it provides some certainty to people directly and indirectly affected when flood events occur. We are going to get this thing built and going to get it built in a timely fashion.”

The flood control and finance committees on Thursday each approved the plan, which requires an amendment to the flood control master plan. The City Council is expected to be asked to sign off on Tuesday. Officials have been working on the plan privately since the beginning of the year.

Under the plan, the city would annually issue $20 million in municipal bonds for flood control from fiscal year 2020 to fiscal 2029, and it would shift an additional $8 million a year currently being bonded for Americans with Disabilities Act improvements to go toward flood control from fiscal 2022 to fiscal 2029. This would generate a projected $264 million over the 10-year period.

The plan still leaves a $78 million hole, but officials hope to secure grants and drum up support from other sources, potentially Linn County, for example, which has numerous properties and taxpayers in flood zones.

The bonding plan is built on the assumption of annual step increases to the municipal property tax rate, which the council would have to approve annually as part of its budget process.

The residential property tax rate has held flat at $15.22 per $1,000 in value for 10 years, and the city has minimized its use of bonding in recent years, putting the city in a strong position financially to take on this new debt, officials said.

For residential taxpayers, in fiscal 2020, City Council would be asked to issue $20 million in bonds, which would result in a property tax levy increase of 22 cents per $1,000 in property value. That is an additional $18 for an $150,000 home.

The plan proposes another 22-cent increase to the property tax levy per year for 10 years, but the annual increase could vary — more or less — depending on a variety of factors that are unknown at this point, such as the interest rate on bonds, residential rollback, change in property valuations, other revenue sources to fund the system, or reducing other parts of the tax levy rate, said Casey Drew, the city’s finance director. The rate would also decrease if the State Legislature approved the use of 30-year bonds, he said.

If the tax rate were to increase by 22 cents per year for 10 years, hypothetically, taxpayers could be paying $17.42 per $1,000 of property value in fiscal 2029.

Building flood protection has been a City Council priority for several years, but officials felt now is the time to act.

“While it may be painful to hear the words to do an increase, it has been known to fund flood protection a three-pronged approach ... has been necessary. That is federal, state and now local,” said Susie Weinacht, a council member and member of the flood committee. “The time is here to step up to the plate and knock home flood protection for our community.”

Flooding is occurring more regularly — including rising waters this week prompting temporary protections — and less money exists to help communities deal with flooding than 10 years ago, leaving local governments to shoulder the burden, officials said.

In 2008, the city was reimbursed about 76 percent between state and federal sources for the more than $1 billion in public infrastructure damages, but the rules are changing, Drew said. By 2016, when the city spent $10 million on temporary protections, the city only recouped about 53 percent, leaving the rest to be shouldered by local taxpayers, he said.

“There’s more disasters now, and they’ve tightened their rules on how you access funding, so it is a much more difficult of a task,” Drew said. “There’s different variables in ’08 that just aren’t here today, so it will fall more on us to fund this.”

If the city does not step up to pay for protection, it could be left paying a much greater amount if another major flood occurs, Drew and others said.

“If it happened again, we could never do it,” Olson said. “First, it would be more than $250 million, but second of all it would be very tough to take it on, so we have to build this, and the $250 million is a lot less expensive than the alternatives.”

Leaders also fear the loss of major businesses along the river, such as Cargill and Quaker Oats, which rebuilt after the 2008 flood, but they question if those businesses would rebuild again should another flood devastate the city. These employers along the river represent thousands of jobs.

Another flood could also start a “viscous downward cycle that puts the city in a bad spot” of people moving out of the community, property values dropping and property taxes rising to compensate, Olson said.

“There is a real economic impact to everyone, whether you work downtown ... whether or not you own property down there, it will have a negative economic impact on everyone in the community ... if this happens again,” Olson said.

Olson and Weinacht also highlighted other benefits of the flood system. A flood wall would create miles of green space and bike trails and other amenities for those who live here and could be a regional draw.

Olson and others said they ruled out the only other option for coming up with the money: a local-option sales tax. They considered it, given that the current local-option sales tax for street repairs will expire in a few years, but that tax has gone to the “very popular” Paving for Progress program and they did not want to disrupt that progress.

This left bonding as the only option, they said.

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The timing of the plan, which has been in the works for several months, coincides with a couple of key moments.

Second, the amount of federal aid has come into question. Sen. Joni Ernst, R-Red Oak, and Rep. Rod Blum, R-Dubuque, had each touted their roles in securing $117 million for Cedar Rapids flood protection in July. However, city officials have been told $41 million of that is actually a low-interest loan that must be repaid over 30 years. That would increase the funding gap the city must fill.

“I think our congressional delegation and our senators were surprised by the notice that it wasn’t all a grant, and so they worked really hard to get us the grant, and I know they are working really hard to get it back up to the $117 million,” Mayor Brad Hart said.